HAL Shares Poised for 50% Upside Amid Strong Earnings and Defense Demand

Mumbai, February 13, 2025 Hindustan Aeronautics Limited (HAL), India’s leading state-run defense aerospace company, is poised for a potential 50% upside, despite witnessing a 37% decline in stock price over the last seven months. Analysts on Dalal Street maintain a bullish outlook, with a consensus target price of ₹5,340 per share, implying substantial growth potential from the current levels.

The stock, which closed at ₹3,594.15 on the National Stock Exchange (NSE) on Wednesday, February 12, has faced short-term corrections, shedding 14% of its value in 2025 so far. However, robust financial performance, increasing defense orders, and long-term government spending on indigenous aerospace projects position HAL for strong recovery and future growth.

Strong Earnings Performance Reinforces Growth Prospects

HAL’s financial performance for Q3 FY25 highlights its resilience and growth trajectory, despite market volatility.

Key Highlights of Q3 Earnings Report (December 2024):

• Consolidated net profit rose 14% YoY to ₹1,440 crore, compared to ₹1,261 crore in Q3 FY24.
• Revenue from operations surged 15% YoY to ₹6,957 crore, fueled by strong defense contracts and aircraft deliveries.
• Sustained order book growth, with increased demand from the Ministry of Defence (MoD).

This consistent earnings expansion underscores HAL’s fundamental strength, making it a compelling investment in the defense sector.

Why Analysts Expect a 50% Upside in HAL Stock

1. Strong Order Pipeline from the Indian Defense Ministry

HAL remains a crucial player in India’s defense modernization program, benefiting from record-breaking defense budgets.

Major defense contracts include production of:
Tejas Mk1A fighter jets for the Indian Air Force (IAF).
Advanced Light Helicopters (ALH) and Light Combat Helicopters (LCH).
Upgrades to Sukhoi Su-30 MKI and MiG-29 aircraft fleets.

Government’s “Aatmanirbhar Bharat” push ensures continued support for indigenous defense manufacturing, securing HAL’s future revenue stream.

With an order book exceeding ₹1.1 lakh crore, HAL is well-positioned to scale operations and sustain revenue growth in the coming years.

2. Valuation Re-Rating: Discounted Stock with Strong Fundamentals

Despite short-term stock price corrections, analysts emphasize that HAL’s underlying business fundamentals remain robust.

The stock is currently trading at a P/E ratio of ~16x, significantly lower than global defense peers, making it an attractive value pick.
HAL has maintained strong cash flows, ensuring stable dividend payouts and consistent return on equity (ROE) above 22%.
The consensus target price of ₹5,340 per share suggests a 50% upside, reinforcing analysts’ confidence in HAL’s long-term trajectory.

As institutional investors rotate funds into defensive sectors, HAL is expected to outperform in the medium-to-long term.

3. Rising Global Defense Expenditure & Export Potential

HAL is expanding beyond domestic defense contracts, focusing on export markets for aircraft and aerospace components.

Key export opportunities include:
Sale of Tejas fighter jets to Argentina, Malaysia, and Egypt.
Increased demand for indigenous trainer aircraft and UAVs.
Supply chain integration with global aerospace giants.

With geopolitical tensions driving global defense spending, HAL’s export revenue potential adds further upside to its stock valuation.

Stock Performance Outlook: Should Investors Buy HAL?

Comparison with Market Peers & Performance Outlook

HAL’s stock is undervalued compared to BEL and L&T, reinforcing its attractiveness for long-term investors.
Its low P/E ratio relative to the defense sector average suggests room for price appreciation.

Analysts’ Recommendations & Price Targets

Dalal Street maintains a bullish stance on HAL, driven by:
Robust financials and growing defense contracts.
Attractive valuation relative to peers.
Long-term government support for aerospace manufacturing.

Morgan Stanley: “HAL remains a key beneficiary of India’s defense expansion.” Price Target: ₹5,300
Goldman Sachs: “HAL’s order book visibility ensures long-term revenue stability.” Price Target: ₹5,400
ICICI Securities: “The correction in stock price presents an excellent buying opportunity.” Price Target: ₹5,340